SUGAR
While March sugar followed through on Wednesday’s outside-day higher close with a mild gain on Thursday, the charts suffered damage this morning with a temporary violation of yesterday’s low at 22.06, which should be seen as a pivot point today. Recent rainfall over Brazil’s major cane-growing regions has caused fresh delays to this season’s harvest following the outbreak of wildfires in August and September. After today, the region will have mostly dry weather through early next week, so this season’s harvesting and crushing is likely to continue. While the Brazilian Real has rebounded from a record low to a 3-week high this week, India’s current export ban and Thailand drought last season has kept Brazil as the major origin for sugar imports. Brazil’s 2024 sugar exports have already exceeded last year’s record high total by late October, with last month’s total a 30% increase over last year’s total. India’s ISMA trade group maintained their forecast for their nation’s 2024/25 production to decline 2.2% from last season, but with 8.5 million in beginning stocks, India could reenter the global sugar export marketplace next year.
COFFEE
March coffee built on early strength yesterday to reach a 3-week high, but prices this morning are showing early signs of correcting some of those gains. Obviously, some of the gains in coffee yesterday were the result of positive global sentiment following the US election as that provides hope for better demand. While Brazil’s major Arabica-growing regions have received rainfall, it may not be enough to provide lasting relief from drier-than-normal conditions over the past few months. After decent rainfall today and tomorrow, the region will not see wet conditions until the middle of next week. The Brazilian Real fell back from a 3-week high on Thursday, but it remains far above the record low set early Wednesday which has relieved pressure on Brazil’s producers to market their remaining 2024/25 supplies.
COCOA
March cocoa pivoted aggressively back to the upside to reach a 3-week high yesterday and early today the market has remained pinned to the vicinity of yesterday’s high as if further upside extension action is ahead. While the market has broken out above its early November consolidation and is back to within striking distance of a new 4 1/2-month high, cocoa prices continue to face headwinds from recent supply developments. In fact, with the Ivory Coast’s Coffee and Cocoa Board projecting their nation’s cocoa arrivals will reach 1 million tonnes by the end of January and that their 2024/25 main crop production will be 10% above last season’s total incoming supply should mean the explosive price action in cocoa seen in the first four months of this year is unlikely to be replicated. Furthermore, Ghana’s Cocobod have estimated their 2024/25 production at 650,000 tonnes which would be a sizable improvement from 2023/24’s 450,000 tonnes, but trade analysts and the International Cocoa Organization are not as optimistic. Another potential supply erosion threat is present a from reports that flooding and heavy rain in Ivory Coast growing areas may encourage the spread of brown rot and reduce port arrivals going into year-end. From the demand side of the equation Hershey expects falling liquidity on global vocal exchanges but also sees high prices lingering due to the impact on production costs from residual global inflation. Hershey’s reduced their full year sales growth because of inflation hamstrung consumers. Along those same lines Swiss chocolate maker Barry Callebaut fears soft demand.
COTTON
With two straight higher highs the path of least resistance is up in cotton. However, the latest higher high failed to hold and prices are drifting back toward the middle point of the large range up rally on Thursday. However, Cotton prices found support from the latest weekly USDA Export Sales Report which showed that for the week ending October 31, net cotton sales came in at 229,039 bales for the current marketing year and none for the next marketing year, which was up 21% from last week and 51% above the 4-week average. This was seen as a strong reading for exports, but that may not continue following the Dollar’s severe post-election rally. For today’s USDA supply/demand report, a Bloomberg survey of analysts has an average expectation for US 2024/25 cotton production at 14.08 million bales (range 13.6-14.3 million) which would be down from 14.2 million in the October update. Exports are expected at 11.46 million (range 11.3-11.5) versus 11.5 in October. Ending stocks are expected to be around 4.02 million bales (range 3.7-4.2 million) versus 4.1 million in October. World production is expected at 116.33 million bales versus 116.64 million in October, with consumption expected to come in around 115.57 million versus 115.74 million in October and ending stocks at 76.23 million versus 76.33 million in October. Strong export sales yesterday will provide some going into the USDA’s supply/demand report.
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